The Budget: A Missed Opportunity?

In Last week’s UK Summer Budget, the first Tory budget in 19 years, the Government presented technology businesses with a double edged sword; corporation tax is reduced but little has been done to correct the skills gap. The Budget promises a cut in corporation tax from 20 percent to 18 percent by 2020 and, while there was mention of an apprenticeship levy and the Annual Investment Allowance has been raised to £200,000, there were absolutely no specific benefits offered to technology companies. The Budget also failed to mention the cut in investment to electrify the railways.

Askar Sheibani, chairman of the Deeside Business Forum and CEO of telecoms repair and support company Comtek (which acquired a Silicon Valley based telecoms equipment manufacturer Sorrento Networks in 2014), offers his comments on why technology companies, in particular, will feel the cuts:

“A double edged sword, sharper on the negative than the positive side, is what George Osborne has offered to technology businesses today. Corporation tax was the people pleaser and this will have a positive impact on business bottom lines across all industries throughout the UK. That wasn’t the whole story, however, and technology companies in particular are set to suffer from the Chancellor’s vague promises around skills and innovation.

“Technology is a fundamental, high growth area for the UK economy, yet it was almost completely overlooked in the UK Summer Budget. This industry is suffering from a potentially critical skills gap, and a generic apprenticeship levy will certainly not balance the labour market. What’s more, as students are hit by the axing of the maintenance grant, this Budget may have done more harm than good for technological innovation in the UK. The technology industry also has some of the highest R&D costs and, although R&D is critical to the progress of the UK economy, this has been essentially ignored by the Chancellor.

“Investment in skills, innovation and infrastructure was needed in the Budget, and none of these have been delivered. Local communities, such as those in North East Wales, are in dire need of support to help them stabilise their own economic future; whether that be in terms of a skilled workforce, reliable broadband or an electrified rail line. The Conservative Government seems to have disregarded this, however, which could prove costly for the UK’s economic prowess not only now, but long into the future.”

Nigel Eastwood, CEO of New Call Telecom, commented “This Budget was a missed opportunity. It contained hardly any mention of tech or telecoms. Yet fast broadband is the backbone of a competitive country, especially an advanced information economy like the UK. It’s essential for business. In the future the Chancellor must continue to make it easier for broadband customers to switch suppliers.

“He should also consider making it mandatory for companies who offer triple- and quad-play packages to cost their services individually. That way consumers will know what they are actually paying for.”

Tristan Watkins, UK country manager for BNP Paribas Leasing Solutions says “While the Chancellor has clearly listened to the warnings that the original plan of cutting the AIA to £25,000 was not wise, there will still be some disappointment that the new level has not been set higher.”

“Businesses will have to act fast if they want to take advantage of the current year’s allowances. Major investments like a complete IT hardware refit will have to be ordered now in order to be ready for use by the deadline at the end of December.”

“In the longer term, the certainty of having £200,000 set as the permanent level will be welcome. However, overall levels of business investment may not increase as fast as they could.”

BNP Paribas Leasing Solutions points out that businesses that want to take full advantage of the current tax benefits available for major capital investments and still keep cash flow healthy can choose leasing rather than outright purchase. They will be able to claim the Annual Investment Allowance for investments as long as the item is in use on their premises by the end of December, and will not need to have made all the payments by that date.

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David Dungay

Editor - Comms Business Magazine